Shree Nakoda Ispat Limited vs. Union Of INDIA

Facts

The petitioner, Shree Nakoda Ispat Limited, filed a writ petition challenging Clause 10.5.2 of an amended Fuel Supply Agreement (FSA) with South Eastern Coalfield Limited (SECL), introduced by a notice dated February 18, 2019. The petitioner argued that this clause arbitrarily allows SECL to indefinitely withhold refunds arising from credit notes, particularly concerning statutory levies like royalty, DMF, NMET, and GST, when coal supplied is of a lower grade than initially invoiced. This practice, the petitioner contended, leads to unjust enrichment for SECL and causes significant financial prejudice by blocking working capital. The petitioner sought quashing of the clause, reconciliation of accounts as per other FSA clauses, and refund of withheld amounts with interest, along with GST dues.

Held

The Court held that the controversy was squarely covered by a previous judgment of a coordinate bench in D.B. Power and Others vs. Union of India (WPC No. 3366/2020 decided on 03.09.2024). In that case, similar directions were issued to SECL to place claims before the State Government for refund/adjustment of excess royalty due to grade slippage. The Court noted that the Ministry of Coal's clarification dated January 13, 2026, categorically states that amounts collected on the basis of a higher grade of coal, subsequently found to be of a lower grade, must be refunded to avoid unjust enrichment. Consequently, the Court directed SECL to present the petitioner's claim for refund/adjustment of excess royalty, DMF, and NMET due to grade slippage to the State Government of Chhattisgarh within two months. The State Government was directed to reconsider and decide the claim expeditiously, considering the second proviso to Rule 64B of the Mineral Concession Rules, 1960, and the Ministry of Coal's communication dated August 12/September, 2023. The entire exercise was to be completed by the State Government within three months thereafter, with any admissible amount refunded or adjusted.

Key Issues

1. Whether Clause 10.5.2 of the Fuel Supply Agreement, as amended by the notice dated February 18, 2019, is arbitrary, discriminatory, and violative of Article 14 of the Constitution of India, by allowing the indefinite withholding of refunds for statutory levies and GST on account of grade slippage? Petitioner's arguments: The impugned clause is ex facie arbitrary and unfair, creating an unconscionable mechanism where refunds for superior grade coal are immediate, but for inferior grade coal, only the basic value and GST are refunded without a timeline, leading to unjust enrichment. This clause contradicts Clauses 9.2 and 12.5 of the FSA regarding reconciliation and equitable adjustment. The respondents' erroneous assessments and withholding of dues are a breach of contract and unfair conduct by a state instrumentality. The petitioner also relies on a coordinate bench judgment in D.B. Power vs. Union of India and a Ministry of Coal clarification dated January 13, 2026, which mandates refunds for excess collections due to grade slippage. Revenue's arguments: Not recorded in the judgment.